Federal Preemption and Competition in the Post 1866 United States Telegraph Market

Abstract

The United States federal government preempted anti-competitive state and municipal telegraph regulations when the 1866 Post Roads Act was enacted. The act granted a de facto national franchise to build and operate a telegraph system anywhere in the United States to any telegraph company organized within any state. The act also outlawed certain types of contracts that had prohibited other companies from acquiring telegraph right of way access. Rival companies took advantage of the dismantling of local entry barriers to enter the telegraph market and compete with Western Union. I present the first empirical evidence indicating the post-1866 United States telegraph market was contested. The evidence is consistent with the theory that the 1866 Post Roads Act contributed to increasing contestability and consumer welfare.